The following trial balance has been extracted from the records of AVONCA Ltd. at 31st December 2018: Dr Cr € |Revenue 36,280 Purchases 22,720 3,040 3,165 2,415 Inventory as at 1 January 2018 Distribution costs Administration costs Land at valuation 1 January 2018 Buildings – cost 1 January 2018 Buildings Accumulated depreciation at 1 January 2018 Factory plant and equipment – cost Factory P&E. Accumulated deprec. at 1 January 2018 Trade receivable and payables 24,040 16,500 4,930 26,890 5,390 4,810 8,670 2,500 Motor Vehicles -cost 1,140 Motor Vehicles Accumulated depreciation at 1 January 2018 Cash at bank Ordinary shares of €1 cach 800 30,000 Loan note interest Dividends 120 300 Share premium account Retained carnings Revaluation Reserve 8,000 9,170 6,000 Finance cost 60 Bank Loan 2,000 3,500 111,220 | 6% Loan notes (redeemable 2020) I11.220 The following items are to be adjusted for in preparing financial statements for the year ended 31st December 2018: (a) Depreciation is to be provided as follows: Buildings 2% per annum straight line Plant and equipment 20% per annum reducing balance Motor Vehicles 20% per annum straight line Depreciation on Buildings is to be charged fully to factory costs (cost of sales). Plant and machinery depreciatio to be allocated 50% Factory, 30% Distribution and 20% Administration. Motor Vehicles is to be allocated entire to Distribution. (b) Closing inventory at 31st December 2018 is valued at cost of € 2,450. Included in inventory at 31st December ? are goods which had cost € 650. Due to a downturn in demand, these goods were sold at auction on 15th Januar; 2019 for € 350. Auctioneer's fees were 10% of sale proceeds. (c) Distribution expenses of € 295 are to be accrued at 31st December 2018 and administration expenses are to be adjusted for a prepayment of € 325 at that date. (d) Corporation Tax for the year ended 31st December 2018 is estimated to be € 940. (e) Included in trade receivables at 31st December 2018 is a balance of € 120, which is considered a bad debt and is be written off. The directors have decided to make an allowance for doubtful debts of 4% of outstanding trade receivables. (f) The bank loan is repayable on Ist July 2019. The balance of the interest on Loan notes needs to be included in ti Financial Statements.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Prepare the company’s Statement of profit or loss for the year ended 31st December 2018 and its
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